As CEO returns, Valeant admits SEC probe

Embattled
firm's problems continue

Valeant Pharmaceuticals finally has its chief executive back after an extended illness, but news of a new federal investigation has rattled investors' confidence.

The embattled company has seen its value plummet by around three quarters since mid-2015 after being drawn into a congressional inquiry into medicine pricing - particularly sharp rises for old drugs - and is under pressure from pharmacy benefit managers (PBMs).

For example, questions have been raised about the price of toenail fungus treatment Jublia (efinaconazole), which costs around $1,000 a bottle, and one PBM - CVS Health - recently placed restrictions on its use.

The company is already under scrutiny over its (now terminated) relationship with specialty pharmacy chain Philidor - said to have inflated its reported revenues - and has had to withdraw its financial guidance for 2016. It has also indicated it will miss a deadline to file restated earnings for 2015.

Valeant has remained tight-lipped about the latest probe by the Securities & Exchange Commission (SEC), other than to say it does not relate to its relationship with Philidor, and that reticence is making some analysts uncomfortable.

For example, Jefferies has downgraded the stock, and Deutsche Bank suspended its rating for the company saying it has been "sceptical" about its business model, which "had formerly depended heavily on fast-paced acquisitions, aggressive cost cutting, tax arbitrage, aggressive US price increases, and a heavy debt load". The bank's report acknowledged, however, a change in Valeant's strategy of late.

In a short statement, the company confirmed it has "several ongoing investigations, including investigations by the US Attorney's Offices for Massachusetts and the Southern District of New York, the SEC, and Congress".

CEO Michael Pearson has returned to work after being hospitalised with pneumonia, and has immediately plunged into a series of meetings with investors to try to steady the ship, according to a Wall Street Journal report.

Yesterday, Valeant was forced onto the defensive again on the pricing issue, issuing a statement about an injectable treatment for migraines called DHE 45 (dihydroergotamine) that it acquired in 2005.

The statement was prompted by remarks made by Democratic candidate hopeful Hillary Clinton last month, in which she claimed the cost of a 10-vial DHE 45 pack had risen from $3,200 in June 2014 to $14,700 now.

Valeant said it has less than 1% of the market for DHE 45 and had implemented the price increase to keep production of the drug viable. A lower-cost generic version from Perrigo "outsells the branded product by more than 250 to 1", it added.